Minnesota Clarifies Treatment of Repair and Maintenance Labor

The Minnesota Department of Revenue has issued a clarification regarding the sales and use tax treatment of repair and maintenance labor. The department also noted that refunds may be available to some taxpayers who collected tax on such labor. The department clarified that labor to repair real property is construction labor which is not taxable. Therefore, labor to repair and maintain electronic and precision equipment that is installed into real property is not subject to tax. This includes the repair and maintenance of heating, ventilation, and air conditioning systems; sprinkler systems; and light fixtures. The department’s interpretation of the law is effective retroactively to July 1, 2013. Taxpayers who collected sales tax from their customers on such labor to repair real property and remitted the tax to the department may file an amended return to receive a refund on the tax. The refunded tax must be returned to the customers who paid the tax. An amended return can be filed up to three and a half years from the date the return was due. Taxpayers must keep all supporting documents for any amended return in their records. (Sales Tax Fact Sheet No. 152A, Minnesota Department of Revenue, December 2013; Sales Tax Fact Sheet No. 152B, Minnesota Department of Revenue, December 2013; Repair and Maintenance Labor Clarifications, Minnesota Department of Revenue, January 2, 2014)

Posted on April 11, 2014